This section explains the criteria we use to assess applications for water supply licences.

If you are thinking of applying for a licence, you must prove that your company is fully competent in all areas before we will grant a licence. Each application is considered on its own merits.

Company details

In assessing the suitability of a company to hold a water supply licence, we will consider whether

• your company has previously been refused an application or had a licence revoked
• the reasons for any refusal or revocation are relevant to the current application

We will also take into account whether any directors or managers of your company have been associated with companies that have had licences refused or revoked.

We will also check that you have paid the application fee and that your company:

• is a limited company within the meaning of the Companies Act 1985
• does not hold an appointment as a water undertaker under the Water Industry Act 1991 (WIA91). It may, however, be an associate of a water undertaker although certain restrictions will apply to its operations.

Financial stability and managerial competency

We will assess your company’s financial and managerial capability to carry out the activities authorised by the type of licence for which you are applying.

If you are applying for a variation of a retail licence to a combined licence, you will need to show that your company has the financial and managerial resources to carry out the additional activities authorised by a combined licence.

In assessing your company’s suitability, we will consider whether it:

• has sufficient financial resources to carry out the activities proposed in its business plan
• has the capacity to raise new funds in the future
• has made provision to finance obligations required under WIA91, including insurance and security arrangements
• has the necessary skills, qualifications and experience to enable the applicant to carry out its functions
• has adequate knowledge and understanding of the duties of licensees, including:
  • the duties of licensees under the WIA91
  • the standard conditions of water supply licences
  • the security issues involved in being a water supplier
• has put systems and procedures in place to
  • comply with its duties under the WIA91
  • comply with the standard conditions of water supply licences
  • comply with the guidance issued by us under the WIA91, such as guidance on eligibility and the customer transfer protocol
  • communicate emergencies and details of vulnerable consumers to the relevant appointed water companies
  • comply with relevant appointed water companies’ existing operational standards
• consents to any specific licence conditions that we are considering

We have not set prescriptive criteria for assessing these points. We will judge whether you have demonstrated that your company has an appropriate awareness of the legal framework and of the responsibilities of a licensee.

Your application must be supported by a sponsor and we will make use of your sponsor's expertise in evaluating whether your company has the financial and managerial capability to be a licensee.

Technical competencies

The Drinking Water Inspectorate (DWI) will assess technical competency.

All applicants need to be aware of the duties and responsibilities of water suppliers. Retail licensees cannot introduce water into the public supply system, so they do not need the same level of technical knowledge as combined licensees. However, they need an overall understanding of water supply and water quality issues, and a good understanding of the particular issues that will affect their activities.

The Drinking Water Inspectorate (DWI) will assess your company has shown an appropriate awareness of the requirements for the type of licence applied for, and will advise us on its assessment of competency. Its advice will help us decide whether to grant a licence.

Prospective combined licensees

If you are applying for a combined licence you will be required to demonstrate that your company is aware of its responsibilities when introducing water into the public supply system. It must also have the resources to meet them. This will be covered by the DWI’s second stage assessment.

Responsibilities of which you should be aware include but are not limited to:

• the Water Industry Act 1991 (WIA91) specifically sections 18, 19, 67-70, 86, 202 and 208
• the Water Supply (Water Quality) Regulations
• the Water Supply (Water Fittings) Regulations 1999
• the technical competency required to operate and manage a water treatment works capable of treating its source water, if applicable
• the need for continual water quality monitoring (in particular for new sources), if applicable

You will also need to satisfy the DWI that your company has adequate knowledge of the following:

• the role of the DWI;
• the regulatory requirement to provide wholesome water
• the definition of water unfit for human consumption
• the penalties for supplying water unfit for human consumption
• drinking water safety plans
• the requirement to meet existing operational standards as set by the water undertaker
• the potential impact of mixing waters of different quality
• treatment processes
• approved products and processes
• the likely impact of their activities on the hydraulics of the supply system and resulting water quality issues
• the circumstances in which it is required to notify appointed water companies
• the relevant security and emergency measures required

Prospective retail licensees

If you are applying for a retail licence you will need to show that your company has an overall understanding of water supply and water quality issues, to make sure that it does not have a detrimental effect on the water supply system. It will also need to be aware of the role of the DWI and of their responsibilities under the relevant sections of WIA91 and the Regulations, including:

• the regulatory requirement to provide wholesome water
• the definition of water unfit for human consumption
• the penalties for supplying water unfit for human consumption
• the circumstances in which they are required to notify appointed water companies
• the relevant security and emergency measures required

Variation from a combined licence to a retail licence

If your company has a combined licence and you are applying for a variation that will give only the retail authorisation then will already have demonstrated to us that your company is capable of carrying out retail activities, so knowledge of the issues set out above will not need to be reassessed. You will, however, need to demonstrate:

• that you has made arrangements for ensuring continuity of supply to your customers
• if appropriate, that you have discussed with relevant persons at the appointed water company how to address strategic supply implications